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UnitedHealth Chair, Executives Sold $102 Million in Stock Before US Probe Became Public

John Tozzi and Anders Melin
Thu, April 11, 2024 



(Bloomberg) -- UnitedHealth Group Inc. Chairman Stephen Hemsley and three senior executives netted a combined $101.5 million from stock sales made over four months leading up to when the public became aware of a federal antitrust investigation.

The sales occurred between Oct. 16, a week after the largest health insurer in the US reportedly received notice of the Justice Department probe, and Feb. 26, the day before Bloomberg News and others published stories about the investigation. The stock dropped after the investigation was widely reported.

There’s no indication that the trades were executed according to scheduled trading plans in filings related to the transactions. UnitedHealth said officers and directors must get clearance to trade shares, and that trading is limited to certain windows that often open after earnings reports. The trades in question were approved, a spokesperson said. The company reported third-quarter earnings on Oct. 13.

Typically a company’s general counsel would declare a blackout period barring trading in light of a sensitive investigation, according to John C. Coffee Jr., a corporate governance expert at Columbia Law School. “Apparently, this did not happen” at UnitedHealth, he said in an email.

The DOJ is reviewing whether UnitedHealth’s acquisitions have consolidated its position in some markets in a way that violates antitrust laws, according to a person familiar with the probe who asked not to be identified discussing a nonpublic investigation. The agency has reportedly been looking at potential monopolies in the managed-care industry since at least mid-2023.

UnitedHealth hasn’t explicitly acknowledged the probe and declined to say when Hemsley and the others were informed of it. When asked about the trades, a spokesperson for the insurer said “these directors and officers followed our protocols and received approval from the company.”

UnitedHealth declined to make Hemsley, the other people involved in the trades, or its general counsel available for interviews, and a spokesperson said they had no comment beyond the company’s response.

The company says in regulatory filings that it is subject to “routine, regular and special investigations, audits and reviews” from various state and federal agencies, including the DOJ.

Disclosure Question

Shares of UnitedHealth fell 5.2% in two trading sessions on Feb. 27-28, after the probe was widely reported in financial media. It was first reported Feb. 26 in the Examiner News, a local publication in New York state. The stock has fallen about 15% so far this year through Wednesday’s closing price compared with an 8% gain in the S&P 500 Index.

Whether the investigation should have been disclosed to shareholders hinges on if it’s considered material, said Charles Elson, founding director of the Weinberg Center for Corporate Governance at the University of Delaware.

The fact that shares fell after the news leaked “would suggest some materiality to investors,” he said. UnitedHealth says all material information is included in its periodic filings.

Share sales by top leaders are usually vetted by a company’s general counsel, Elson said. They evaluate whether the company must disclose any additional information to the market before the trades occur, he said.

“The question is, when they first were aware of the investigation, was it viewed as material?” Elson said.

Also weighing on the stock is a cyberattack on the company’s Change Healthcare subsidiary. The attack knocked out crucial data and payments systems, sowing chaos throughout the health-care industry.

UnitedHealth operates the largest US health insurer, UnitedHealthcare, and a growing network of clinics, surgery centers, home-care providers and other services under its Optum division. Hemsley has served as chairman since he stepped down as chief executive officer in 2017 after more than a decade at the helm.

On Oct. 17 and Dec. 5, Hemsley exercised a portion of his stock options set to expire in 2024. He sold the shares he’d acquired the same day, netting him $84.9 million, according to filings.

Brian Thompson, CEO of the UnitedHealthcare insurance unit, on Feb. 16 exercised options and sold shares, netting him $15.1 million, according to Bloomberg calculations. Days later, Chief Accounting Officer Tom Roos sold shares worth about $450,000.

Chief People Officer Erin McSweeney on Oct. 16 exercised options and offloaded shares for a net gain of $1.09 million, filings show.

Hemsley’s options were set to expire in February and November 2024, the filings show. The options held by Thompson and McSweeney had several years left until expiration.

While it’s not unusual for executives to periodically sell shares, Hemsley rarely sold stock while he served as CEO. Starting in 2020, he began offloading at irregular intervals: three times that year and again in 2021, then once in 2022, filings show. His net proceeds from each transaction have ranged from around $13 million to as much as $70 million. The Oct. 17 transaction, which netted him $55.7 million, is among the biggest he’s done in recent years.

Hemsley remains a significant UnitedHealth shareholder with more than 1 million shares valued at more than $450 million, held directly and in trusts, according to data compiled by Bloomberg. Each of the three executives also still hold shares in the company.

McSweeney and Roos have occasionally sold shares in recent years. This is the first year that Thompson has sold shares since he became CEO of the insurance division in 2021, at which point he had to start reporting his transactions.

--With assistance from Leah Nylen.

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